ispace,inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.19B
• Operating Income: ¥-4.16B
• Net Income: ¥-6.39B
• EPS: ¥-42.17

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

ispace reported FY2026 Q2 consolidated results under JGAAP showing rapid top-line growth but continued substantial losses. Revenue rose 63.5% year over year to 2,193 million yen, while gross profit was 204.7 million yen, implying a low gross margin of 9.3%. Operating loss remained large at 4,162 million yen (roughly flat YoY per disclosure), reflecting heavy fixed costs and investment intensity relative to scale. Ordinary loss widened to 4,459 million yen, with interest expense of 422 million yen increasing the burden on already negative operating earnings. Net loss was 4,463 million yen, translating to EPS of -42.17. EBITDA was -4,107 million yen, indicating that even before depreciation and amortization, the business remains deeply loss-making. The DuPont breakdown highlights a net margin of -203.5%, very low asset turnover of 0.062x, and high financial leverage of 31.86x, resulting in a calculated ROE of -404.6%. On the balance sheet, total assets were 35,137 million yen, liabilities were 20,182 million yen, and reported equity was 1,103 million yen; this thin equity base amplifies leverage and ROE volatility. Liquidity metrics are strong on a current basis (current ratio ~4.95x; quick ratio ~4.95x), implying near-term obligations are covered by current assets, though cash composition is not disclosed. Operating cash flow was an outflow of 5,325 million yen, and financing cash flow was an inflow of 5,268 million yen, indicating reliance on external capital to fund operations. Free cash flow is not assessable given investing cash flow is undisclosed (shown as zero by data convention). Interest coverage is negative (-9.9x), underscoring earnings’ inability to service debt from operations. Dividend distribution remains suspended (DPS 0), appropriate given the loss-making position and cash needs. Overall, the profile is that of an early-stage, capital-intensive company with improving revenue traction but insufficient scale to cover fixed costs. The key issues are profitability inflection, cash burn control, and maintaining funding access while leveraging commercial and program milestones. Several items (inventories, cash and equivalents, investing CF, equity ratio, share counts) appear undisclosed in XBRL and are shown as zero; analysis focuses on the reported non-zero figures.

Profitability Analysis

ROE decomposition indicates: Net profit margin -203.5% (NI -4,463m / Rev 2,193m), Asset turnover 0.062x (Rev 2,193m / Assets 35,137m), and Financial leverage 31.86x (Assets 35,137m / Equity 1,103m), yielding ROE of approximately -404.6%. The negative margin is the primary driver of poor ROE, compounded by very low asset turnover typical of asset-heavy, early commercialization phases. Gross margin is 9.3%, indicating limited pricing power or high direct mission/service costs at current scale. The EBITDA margin of -187.3% and operating loss of -4,162m show that fixed operating costs (R&D, SG&A, mission prep) dominate the P&L. Operating leverage remains adverse: despite 63.5% revenue growth, operating loss stayed essentially unchanged YoY, implying incremental gross profit is not yet sufficient to offset the fixed cost base. Interest expense of 422m deepens ordinary losses; with interest coverage at -9.9x, the company lacks earnings capacity to service debt/interest without external funding. Tax expense is negligible given losses. Profitability will depend on scaling revenue with materially higher gross margins and/or cost discipline to convert incremental revenue into operating leverage.

Growth Assessment

Revenue grew 63.5% YoY to 2,193m, a strong pace suggesting commercialization progress and possibly milestone or service revenue ramp. However, the low gross profit (204.7m) indicates revenue mix and contract economics currently yield thin contribution margins. The stability of operating loss (+0.0% YoY) despite strong revenue growth suggests the company has not crossed operating breakeven thresholds; fixed costs likely rose alongside program build-out. Profit quality is weak at this stage: EBITDA and operating income are deeply negative, and ordinary income remains constrained by interest costs. Near-term growth sustainability hinges on backlog conversion, new contract wins (government/enterprise), and mission execution timelines; revenue may remain lumpy due to milestone recognition. Outlook: while top-line momentum is encouraging, margin expansion will be the key determinant of trajectory; sustained double-digit gross margin improvements are needed to demonstrate scalable unit economics. Given the capital intensity, any schedule delays can defer revenue and compress margins if additional costs are incurred. Overall growth potential remains high but accompanied by execution and timing risks typical for deep-tech commercialization.

Financial Health

Liquidity appears solid on current metrics: current assets 19,068m vs. current liabilities 3,855m yields a current ratio of ~4.95x and a quick ratio of ~4.95x (inventories undisclosed). Working capital stands at 15,213m, supporting near-term obligations and project execution. Solvency is weak due to a very thin equity buffer: equity is 1,103m against assets of 35,137m, implying high leverage (Assets/Equity 31.86x) and debt-to-equity of 18.30x. Interest expense of 422m and negative interest coverage (-9.9x) indicate servicing costs add pressure to the income statement. Equity ratio is undisclosed in the source (displayed as 0.0%), but based on totals, equity/asset would be low single digits, consistent with the high leverage metrics. The capital structure is dependent on external financing, as evidenced by 5,268m inflow from financing activities in the period. Overall, near-term liquidity is adequate, but medium-term solvency relies on improving profitability or continued access to capital.

Cash Flow Quality

Operating cash flow was an outflow of 5,325m versus net loss of 4,463m, yielding an OCF/NI ratio of 1.19 (both negative), indicating cash burn slightly exceeds accounting losses—common when working capital builds or non-cash charges are modest (D&A only 55m). Free cash flow cannot be reliably computed due to undisclosed investing cash flows (shown as zero by convention). Financing cash inflow of 5,268m effectively funded the operating burn, underscoring reliance on capital markets or debt providers. Working capital dynamics are not fully visible (inventories and cash undisclosed), but the large current asset base versus current liabilities suggests pre-funded projects, advances, or receivables; timing of collections will be important for OCF in coming quarters. Earnings quality is low at this stage, with negative EBITDA and heavy dependence on financing to sustain operations. Monitoring conversion of reported revenue to cash (DSO) and any prepayments/deferred revenue will be key to assessing future OCF quality.

Dividend Sustainability

No dividends are paid (DPS 0.00) and payout ratio is 0%, appropriate given the net loss of 4,463m and negative operating cash flow of 5,325m. With free cash flow not assessable (investing CF undisclosed) and financing inflows required to fund operations, there is no capacity for distributions in the near term. The company’s likely policy focus is cash preservation to fund mission/program execution and growth. Dividend initiation would require sustained positive EBITDA/OCF and a materially stronger equity base; near-term outlook for dividends remains remote.

Risk Assessment

Business Risks:

• Execution risk on mission and program timelines leading to revenue deferrals and cost overruns
• Customer concentration and contract dependency (government/enterprise), with milestone-based, lumpy revenue
• Technology and manufacturing risk inherent to space and advanced engineering activities
• Supply chain and vendor reliability for specialized components
• Regulatory and export control compliance across jurisdictions
• FX exposure (e.g., USD/JPY) affecting costs and contract profitability

Financial Risks:

• High financial leverage (Assets/Equity 31.86x) with thin equity buffer
• Negative EBITDA and operating losses leading to persistent cash burn
• Interest burden (422m) with negative interest coverage (-9.9x)
• Dependence on external financing (5,268m inflows) to fund operations
• Potential covenant or refinancing risk if capital markets tighten
• Low equity ratio (undisclosed, implied low single digits) increases solvency risk

Key Concerns:

• Path to margin expansion from 9.3% gross margin to sustainable levels
• Achieving operating leverage given fixed cost intensity
• Visibility and timing of revenue recognition across milestones
• Maintaining liquidity without dilutive or costly financing
• Sensitivity to schedule slippage impacting cash conversion

Investment Implications

Key Takeaways:

• Strong revenue growth (+63.5% YoY to 2,193m) but margins remain very thin (GP margin 9.3%)
• Operating loss large and flat YoY (-4,162m), indicating limited operating leverage to date
• Leverage is extreme due to small equity base (Assets/Equity 31.86x; D/E 18.30x), amplifying ROE volatility (-404.6%)
• Liquidity appears adequate short term (current ratio ~4.95x; working capital 15,213m), but solvency depends on financing access
• Cash burn substantial (OCF -5,325m) and funded by financing inflows (5,268m); FCF not assessable due to undisclosed investing CF
• Interest expense (422m) weighs on ordinary income; interest coverage -9.9x

Metrics to Watch:

• Backlog, new contract wins, and milestone schedule adherence
• Gross margin trajectory and contribution margin per program
• EBITDA and operating loss progression versus revenue growth
• Operating cash flow, DSO, and working capital turns
• Financing activities, cash runway disclosures, and cost of capital
• Leverage ratios (D/E, Assets/Equity) and any equity capital measures

Relative Positioning: Compared with early-stage, capital-intensive peers on the TSE Growth market, ispace shows strong revenue momentum but weaker profitability and higher leverage, relying more heavily on external financing while pursuing commercialization of complex, long-cycle programs.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis